September 23rd, 2013 by Tatyana Levin
For a long time commercial real estate was limited to those who had the funds to afford such a potentially expensive undertaking. Although financing is available, the down payment alone on a property that costs millions of dollars is usually out of reach for most people.
But with the rise of concepts like crowdfunding, pooling money together in an official capacity to buy a commercial property as an investment is possible, potentially profitable, and popular with the help of REITs.
Real Estate Investment Trusts (REITs) are like pools of money from many different sources that come together to purchase different properties and either proportionally make money as the properties becomes profitable or proportionally lose money if the properties are unprofitable.
Ultimately REITs work like stocks but in properties rather than in a company. Like stocks, REITs have a degree of risk which means that investors shouldn’t go into the process blindly and should research specific REITs before committing.
A REIT isn’t a single property but a group of properties managed by an investment group to diversify risk and not so put many eggs in one basket. REITs also allow investors to sell their shares which is significantly easier that selling an entire property yourself.
Although investing in REITs isn’t the same as buying a commercial property, it can give you a good taste of what owning commercial property is like, and it can be a great way to earn enough money for a down payment on your own commercial property.